Starbucks Stirs Store Strategy

25. June 2018.

Scale has its positives and negatives. A key upside is purchasing power. The larger an enterprise the more leverage it may wield in negotiating cost. A downside is maintaining a consistent rate of growth compared to past performance is difficult. Management of the Starbucks Corp., Seattle, is currently addressing the latter challenge.

In its current form, Starbucks does business in 77 countries around the world, is involved in the operation of 28,000 stores, employs approximately 330,000, and serves nearly 100 million customers on a weekly basis. Books have been written about how the company has grown from a local northwestern enterprise into a global coffee powerhouse.

Now management is writing the company’s next chapter. It involves expanding in China and streamlining its corporate structure and operations in developed markets to become more agile.

“Over the past three years since I’ve joined the leadership team, we’ve delivered a top-line revenue CAGR of 10%, 17% on earnings per share, and we’ve returned $12 billion of capital to shareholders,” said Kevin R. Johnson, president and chief executive officer, during a June 19 presentation at the Oppenheimer Consumer Conference. “That said, our growth has been slowing.”

To reposition Starbucks for future growth Mr. Johnson outlined two key strategies the company is employing to continue growing. The first involves a retail alignment that seeks to ensure the company has the right number of stores and invested capital in various global markets. The second initiative involves business simplification and has included the divestment of slower-performing parts of the business like Tazo tea, closing Teavana retail stores and entering alliances with companies like Nestle S.A., Vevey, Switzerland.

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